Oil prices have US scrounging for supplies

NEW YORK
— As the price of oil moved to over $30 a barrel, Steve Layton started thinking about ways he could increase the production at Equinox Oil Co., a small oil and gas company based in The Woodlands, Texas.

So, he's now in the process of repairing some Great Bend, Kan., wells, which were not worth fixing when the price of oil collapsed three years ago. "We have a number of projects we'll do at this price," says Mr. Layton.

Layton is not the only oilman heading back into the fields. Almost every available drilling rig in the nation is in use - an increase of almost 99 percent over last year - as oil companies try to take advantage of the high price of oil and natural gas.

Now, as the US heads into a winter of unusually high energy prices, one of the major questions facing the nation is how much oil, gas, and clean-burning coal can actually be produced within its own borders.

This question has become part of the presidential debate. Gov. George W. Bush, a former oilman, is convinced the US can increase reserves if it opens up land environmentalists consider sensitive to development. Vice President Al Gore wants to "reduce the nation's dependence on unreliable imported oil" in part by using more coal and giving tax breaks to drivers of fuel-efficient cars. Only yesterday, Federal Reserve Chairman Alan Greenspan said he's concerned rising energy prices could harm the economy.

Experts believe neither candidate is exactly right on the issue.

Although higher prices are stimulating more drilling, the US is likely to depend on imported oil in coming decades. "If pushed, we might be able to get another 1 to 2 million barrels per day out of the ground, but we will still import 7 to 8 million barrels per day," says Mike Lynch, vice president for global oil at WEFA, an economic forecasting service.

Drilling in ANWR

To get to the extra oil would not be easy. A significant amount is thought to be in environmentally sensitive areas, such as the Arctic National Wildlife Refuge (ANWR) in Alaska. Early estimates place the potential there at between 3 billion and 11 billion barrels of oil.

President Clinton has vetoed legislation allowing drilling in the area, which hosts polar bears and a large caribou herd.

"Opening up this refuge is one of the defining issues - every day we hear why we ought to open it up to drilling," says Melinda Pierce, a Washington lobbyist for the Sierra Club. "But our argument is that full-scale development - roads, waste pits, pipelines, and gravel pads - is incompatible with the wilderness."

One of the major proponents of drilling at ANWR, Sen. Frank Murkowski (R) of Alaska, counters that, out of an area the size of South Carolina, the drilling footprint would only cover 2,000 acres. "We've learned from Prudhoe Bay how to do this so we don't leave a mark on the environment," he says.

The Department of Energy is currently updating its forecasts of US gas and oil reserves, and most experts expect those estimates to go up. In the past five years, the US exploration of the deep waters of the Gulf of Mexico has increased significantly.

But part of the land under reassessment is off-limits to drilling. Geologists think there may be oil and gas on the eastern side of the Gulf of Mexico and off both coasts. But even Republicans like Governor Bush oppose development.

There are also large parts of the Rocky Mountain region on federal land that companies would like to look at. "Unfortunately, it's an area that is becoming increasingly restricted" to development, says Ed Porter of the American Petroleum Institute.

Environmentalists don't believe US reserves, which make up about 5 percent of the world's supply, will ever be enough to make it worth the risk of drilling.

"Oil is a finite resource. Our reserves in the Lower 48 peaked in 1970 and have been declining ever since," says Jim MacKenzie of the World Resources Institute.

Plenty of coal, but ...

And they are not much more enthusiastic about coal, which supplies about two-thirds of the nation's electricity. Although there are vast supplies, burning it results in more greenhouse gases, even with cleaner technologies.

But the US may not have too many choices in the future. Oil and gas producers complain that new discoveries are getting increasingly expensive. David Banko, a Denver-based petroleum consultant, recounts how it took more than three years to get an environmental-impact statement approved to drill a field in southwest Wyoming. And "at the end of the day nothing changed - they drilled as they had planned."

Also the industry is wary of risk, now that it's gone through tough times. "When the price was at the bottom, we literally could not pay the electric bill on some of our wells," says Layton.

But that was yesterday. Today, he's excited about his plans to explore for oil south of Houston.